Lagarde turns to civil society in ECB transformation effort

European Central Bank President Christine Lagarde began a public “listening” tour on Wednesday, engaging civil society for the first time as she seeks to readjust the bank’s strategy and make it more responsive to social challenges.

In the bank’s first strategy review in 17 years, the ECB is looking to redefine its inflation target. It will also look at what it can do to fight climate change, foster inclusion, reach civil society and empower women.

The engagement contrasts with the traditions of a deeply technocratic institution, which has primarily focused its efforts on banks and financial markets, spending relatively little time to reach ordinary people.

“The euro is the common currency of all citizens of the euro area, it is their common good, and we are the custodians of that common good. The European central bank at the service of the European citizens,” Lagarde said at the ECB Listens event.

With dozens of non-governmental organizations speaking directly to Lagarde and ECB chief economist Philip Lane, the biggest criticism was levelled at the ECB for using blunt tools that disproportionately benefit the wealthy and reach the real economy too slowly.

Buying trillions of euros worth of debt, the ECB hopes to boost the euro zone economy by cutting borrowing costs across the board, a strategy critics says takes too long to reach the vulnerable.

“It’s equivalent to trying to replenish the ocean by dumping water on top of Mount Everest,” said Martin Schmalzried from the Coface Families Europe association.

Several NGOs also criticized the ECB for merely talking about fighting climate change while its oversized bond purchases actually benefit some of the biggest polluters on the continent.

The ECB buys bonds according to a principle of market neutrality. But markets are not pricing climate risk and over-allocate capital to the biggest emitters, so neutrality actually benefits polluters, many argued.

“If you believe that you can be climate-neutral these days, you might as well be a member of a murder-suicide cult,” Jeroen Kwakkenbos at Oxfam said.

The review is due to conclude by the middle of next, but the revised inflation target could be introduced early next year.